What made AusCann and Blackmores move on ASX – AC8, BKL?

AusCann Group Holdings Ltd

AC8 details

AusCann and Canopy Growth’s Partnership Expansion: AusCann Group Holdings Ltd.’s (ASX: AC8) stock climbed up 11.7% on April 24, 2018 after the announcement that the group received an import permit under its existing import licence. Following this development, the company will soon receive finished cannabis oils from its major shareholder, Canopy Growth Corporation. According to the release, the Group will initially import Canopy-supplied AusCann branded products for chronic and neuropathic pain control known as AC 5:5, AC 0:9.5, and AC 15:0. Each name represents the ratio of tetrahydrocannabinol (THC) to cannabidiol (CBD) in each product. Furthermore, Canopy and AusCann are working together on developing an arrangement where Canopy will also supply AusCann with Spectrum Cannabis branded products for AusCann to distribute into the Australian market alongside existing AusCann products. Spectrum Cannabis is Canopy Growth’s international medical brand, operating under a simple colour-coded system to classify its medical cannabis products.


Key Milestones Projected For 2018 (Source: Company Reports)

Moreover, AusCann signed a separate agreement with Australian Pharmaceutical Industries Limited ("API"), with the objective of establishing a logistics relationship for the distribution of AusCann's medical cannabis products throughout API's extensive nationwide pharmacy network. According to the management, ongoing relationship with Canopy Growth corporation offers major benefits for AusCann and expect that the combination of this arrangement and strong partnership with Tasmanian Alkaloids, sets AusCann in a place to be the main supplier of affordable, effective, and clinically-validated cannabinoid medicines to the Australian market and select international markets. Meanwhile, the stock has risen 241.2% in past six months as at April 23, 2018. Based on the developments and price rally so far, we give a “Hold” recommendation on the stock at the current market price of $ 1.620.
 

Blackmores Ltd

BKL Details

Enviable Nine Month Performance amidst Supply Challenges: Blackmores Ltd (ASX: BKL) announced solid nine months performance to 31 March 2018, despite facing supply challenges during the period. Net sales recorded a growth of 8.5% to $434 million in 9M FY18 compared to prior corresponding period. This sales growth was supported by strong advertising and promotional activity running in Australia during the March quarter. Net profit after tax (NPAT) grew by 19.3% to $52 million in 9M FY18 compared to prior corresponding period on the back of strong topline growth. However, China sales were below the expectations in the quarter due to supply challenges and the renegotiation of customer trading terms, but the management is expected to improve the performance in Q4 FY18. Besides this, other Asia revenue showed strong growth of 20% to $60 million during the aforesaid period compared to prior corresponding period on the back of strong sales growth of Indonesia, Korea, Hong Kong & Taiwan region. BioCeuticals Group’s net sales at $79 million were up 11% compared to the prior corresponding period and will further benefit from the recent extended distribution of IsoWhey products into new sales channels.

            
Continued Consistent Sales Performance Trend (Source: Company Reports)

Besides this, the management announced a strategic acquisition of Australian manufacturing facility wherein the Group will acquire 100% of the issued share capital of Catalent Australia Holding Pty Limited from Catalent Inc. on a cash free and debt free basis. The total acquisition cost is expected to be A$43.2m, subject to agreed adjustments. The completion is expected to occur on or before 31 October 2019 and is expected to be fully debt-funded. This acquisition will support the Group’s future growth and product innovation with strong research and development capabilities and provide greater control over production. Further, the company has appointed Jackie McArthur to the Board as Non-Executive Director. The management expects that the current growth trajectory will continue and will deliver good profit growth for full year. However, the stock price was down by 26.94 per cent this year to date, as on April 23, 2018 and further fell by 1.75% on April 24, 2018. Despite this, the stock trades at a slightly high level. We give an “Expensive” recommendation on the stock at the current market price of $ 121.830.

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